Mortgage Lenders terminates Sovereign Bank loan servicing agreement

By Caroline Salls

Pittsburgh, April 11 - Mortgage Lenders Network USA, Inc. obtained court approval of a stipulation that allows the company to terminate its servicing agreement with Sovereign Bank, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

On Jan. 29, Sovereign terminated all of Mortgage Lenders' rights under the mortgage loan servicing agreement, and all of the mortgage loans have been transferred to new servicers.

Under the stipulation, Sovereign will pay Mortgage Lenders a $1.05 million termination fee, with $878,500 to be paid within three business days of the stipulation approval and the rest to be paid by April 19.

Until April 19, Sovereign will be auditing the transferred loans to find out if any loss to the loans was the result of improper servicing by Mortgage Lenders.

If improper servicing is found, Sovereign can set off the agreed upon undisputed losses from the remaining fee.

Mortgage Lenders must also pay to Sovereign the $2.27 million it was holding in escrow for taxes, insurance and other payments on the mortgage loans.

Mortgage Lenders Network, a Middletown, Conn.-based lending company, filed for bankruptcy on Feb. 5. Its Chapter 11 case number is 07-10146.

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